Wednesday, January 16, 2008

Market Outlook Better...?

With the past two weeks of bloodbaths, it may be time to seriously reconsider the financials. Citigroup has taken their medicine for the subprime mess and many other banks are scheduled to do so as well. Bank of America's buyout of Countrywide will occur soon. JP Morgan's profit, while significantly lower than last quarters, is still a profit. Overall, while the financials may not be out of the woods yet, at least people can see a dirt path out.

Across the rest of the market, as this sentiment for financials turns positive, and the pending rate cuts coming from the Fed, gold prices have started to fall a little, as panicked investors begin to question their own level of panic.

Oil continues to creep up slowly, but I think will fall due to downturns in the US economy (I am reluctant to use the R-word here) in a classic decrease demand, decrease price scenario.

Recommendation for tomorrow (Jan 17)? Classic butterfly option spreads are going to be good on general indexes. The volatility still remains high. XLF, the financial ETF, looks good as well. GDX is something to consider if you believe that the rate cuts will continue to drive down the value of the dollar and you would rather invest in some gold.

No comments: